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Vitaly Pentegov
Vitaly Pentegov

The document summarizes the Russian banking crisis that began in 2008 and the subsequent economic crisis in 2014-2015. It provides background on the structure of the Russian banking sector and describes the effects of the global financial crisis in 2008, including a stock market decline, rising unemployment, decreased GDP and industrial production. It also outlines government anti-crisis programs and timelines of the crises, noting that the 2014-2015 crisis was driven by a reduction in oil prices, sanctions, and a devaluation of the ruble.

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N A T I O N A L R E S E A R C H U N I V E R S I T Y National group paper prepared by: Alexander Kulakov and Vitaly Pentegov
Meet our group 2 Management Department Mathematical Department Sberbank CIB VTB bank Alexander Kulakov Vitaly Pentegov N A T I O N A L R E S E A R C H U N I V E R S I T Y
Contents 3 N A T I O N A L R E S E A R C H U N I V E R S I T Y Banking sector in Russia The Great Recession Russian crisis in 2014-2015 Anti-crisis government program
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Structure of the Russian banking sector 5 N A T I O N A L R E S E A R C H U N I V E R S I T Y Central Bank Banks Credit organizations Subsidiaries of foreign banks Commercial banks Banks with state share Banks with foreign share Creditorganizations Sberbank VTB Gazprombank Open bank Alfa bank Rosselkhozbank Top 6 banks by assets
Main indicators of Russian banking system 6 N A T I O N A L R E S E A R C H U N I V E R S I T Y 0 2 4 6 8 10 12 14 0.0 1000.0 2000.0 3000.0 4000.0 5000.0 6000.0 7000.0 8000.0 9000.0 10000.0 2010 2011 2012 2013 2014 2015 亠亟亳, 亟亠仗仂亰亳 亳 亟亞亳亠 亠亟于舒 仂 舒仆从舒 仂亳亳 亠仗仂亰亳 亳仆亳仆舒 亳 亟亞亳亠 亞仂. 亠亟于舒 个仂仆亟亳仂于舒仆亳亠 丶, % 仂 仗舒亳于仂于 Deposits from Ministry of Finance and another state funding Funding from the central bank, % of capital Credits, deposits and other funding from the central bank 1094 1071 1049 1047 1046 956 923 834 830 827 01.01.2013 01.01.2014 01.01.2015 01.02.2015 01.03.2015 Registered credit institutions Officially functioning Qualitative characteristics of Russian banking sector Share of the government support, bln. of rubles 0 50 100 150 01.01.2013 01.01.2014 01.01.2015 01.02.2015 01.03.2015 Ratio of high liquid assets to total assets Ratio of liquid assets to total assets Ratio of high liquid assets to demand liabilities (N2) Ratio of liquid assets to short-term liabilities (N3) Ratio of clients' funds to total loans Liquidity, %
Main indicators of Russian banking system 7 N A T I O N A L R E S E A R C H U N I V E R S I T Y Some indicators of the banking sector financial soundness, % 13.7 13.5 12.8 12.6 12.2 8.5 9.1 9.2 9.4 9 50.7 51.4 52.1 52.7 52.1 1.01.13 1.01.14 1.07.14 1.10.14 1.11.14 Ratio of own funds (capital) to risk-weighted assets (Basel III N1.0 ratio) Tier I capital ratio N1.2 (Basel III) Risk-weighted assets (Basel III) to total assets ratio 2007 2008 2009 2010 2011 2012 2013 2014 Deposits from organizations Deposits of individuals Loans to individuals Credits for non-financial organizations Equity Assets Banking sector growth indicators per year
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About the crisis 9 N A T I O N A L R E S E A R C H U N I V E R S I T Y The Great Recession in Russia the Russian financial end economic crisis started approximately in July, 2008 and officially ended in April, 2010 caused by the global financial crisis and was compounded by political fears after the war with Georgia and by the plummeting price of Urals heavy crude oil, which lost more than 70% of its value since its record peak of $147 on 4 July 2008 before rebounding moderately in 2009. World Bank: Russian crisis in 2008 started as the crisis of private sector caused by high level of foreign funding in conditions of triple shock: from external trade, capital outflow and high restrictions on foreign borrowing.
Causes of the crisis 10 N A T I O N A L R E S E A R C H U N I V E R S I T Y The impact of the global crisis was stronger to Russia than to another countries due to the following 3 reasons: American financial catastrophe; Oil price decline due to high dependence of Russia on its export; Errors and misunderstandings of Russian government Alexey Bayer, chief observer in Research Journal
Stock market decline 11 2008 Vladimir Putin criticizes Mechels management Increase in anti-monopoly deals Newsweek Journal: After the war starts, Russian stock market faced one of the highest declines in stock quotes for the last 10 years. During one day quotes fell by 6%. Investors afraid of beginning of a new era of confrontation between Russia and West 2008 24 July 20 September 11 N A T I O N A L R E S E A R C H U N I V E R S I Illarionov A.N., economist, past president Putin advisor: This happened because of the aggressiveness of Russian authorities against the Russian and foreign business. One of the most brightest events were: the sending of the doctor to Mechels CEO and resignation of Robert Dudley from TNK-BP War in South Ossetia The beginning period: stock market decline
12 Decline in oil prices 2008 On the 16th of 2008 Urals Oil slumped to less than 70 dollars for barrel. This price was the basis indicator for Russian budget for 2009. Credit crisis of the Russian companies In the beginning of October the level of companies external debt was 527 billion dollars the level of foreign-exchange reserve that year 2008 4 July October 12 Employment problems 2008 In October 2008 the level of firing in companies started to increase despite of promises of officials and expectations of analysts 8 October Illarionov A.N. (9 October): There is a 15% decline in stock indices in the USA for the last months but in Russia for more than 30 Source: ROSSTAT, Russian Central Bank, Reuters In the last 5 month the Russian stock market lost more than 70% of the level in May. The market capitalization of Russian companies fell by more than 900 billion dollars Great recession in Russia
13 Decrease in ratings by world rating agencies 2008 After the decrease in ratings for several Russian banks from Fitch and Moodys, S&P also decreased its rating on 13th Russian companies and then the sovereign rating from stable to negative" Beginning of the crisis in real sector2008 10 October 18 November 13 GDP decrease 2008 0.4% of GDP decrease from the last month indicator 25 November Russian president Dmitry Medvedev told about the income of crisis to the real sector (industrial). According to the statements published by the Russian central bank on the 26th of November the total loss of the Russian banking sector came to 39.3 billion of rubles in October 2008. 1/3 of Russian banks (288 banks) lost 69 billion of rubles excluding Vneshekonombanks loss of 46 billion Great recession in Russia
RTS index, S&P 500 and Oil price comparison 14 N A T I O N A L R E S E A R C H U N I V E R S I T Y A Vladimir Putin criticizes Mechel; B war in South Ossetia 2008; C Recognition of Abkhazia and South Ossetia by Russia; D Alexei Kudrin "no systematic crisis" speech; E measures to save major banks are adopted by the Russian government; F Global financial crisis of SeptemberOctober 2008; G President Dmitri Medvedev announced additional bailout financing $147(July 4, 2008) $45 (January 1, 2008)
15 15 N A T I O N A L R E S E A R C H U N I V E R S I Decrease in turnover 2009 Decrease in production2009 10 October 18 November End of recession 2009 24 August The turnover of commodities decreased by 2.4% firstly since 1999 According to Forbes, the number of Russian dollar billionaires decreased from 110 to 32 from May, 2008 to February, 2009. Their wealth decreased almost by 5 times. In the 1Q of 2009 the production of goods decreased by 14.3% in comparison with the 1Q of 2008 In the beginning of August 2009, Russian GDP increased by 7.5% on the basis of the 2Q of 2009. In the 2Q of 2009 the GDP was -10.9% Source: ROSSTAT, Russian Central Bank, Ministry of Economics 19th of February 2009 the peak of the crisis
16 End of the crisis 2010 20 April 16 N A T I O N A L R E S E A R C H U N I V E R S I End of the crisis Change in USD/Ruble and RTS index on the peak of the crisis relative to the same indicators of the year before and of the next year after the peak,%
17 17 N A T I O N A L R E S E A R C H U N I V E R S I Summary 6.50 9.50 6.00 5.00 2007 2008 2009 2010 -10.00 -8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 2007 2008 2009 2010 GDP Interest Rate Banking sector dynamics 2290.51 631.89 1444.60 1770.28 2007 2008 2009 2010 RTS index Credit portfolio, % Revenue Deposits from physical clients, %
18 N A T I O N A L R E S E A R C H U N I V E R S I Government anti-crisis solutions In 2008, the anti-crisis programs cost 1089 bln. (20 bln. ; 2.6% of GDP). The support of financial sector cost 785 bln. (14 bln. ), The support of industry sector 304 bln. (6 bln. ). Measures for financial sector support implemented during the crisis in 2008: Subordinated debt 450 bln. (8 bln. ); Recapitalization and another direct support 335 bln. (6 bln. ); Recapitalization of the Deposit Insurance Agency 200 bln. (4 bln. ); Banks recapitalization 75 bln. (1.4 bln. ); Recapitalization of the Mortgage Agency 60 bln. (1 bln. ). Measures for industrial sector support implemented during the crisis in 2008 : Tax and budget improvement measures for manufacturers 272 bln. (5 bln. ); Support of industries 52 bln. (1 bln. ); Tax and budget improvement measures for manufacturers for people 32 bln. (0.6 bln. ); Purchase of commodities for military men and socially vulnerable groups 32 bln. (0.6 bln. ).
19 N A T I O N A L R E S E A R C H U N I V E R S I Government anti-crisis solutions In 2009, the anti-crisis programs cost 1834,77 bln. (33 bln. ), The support of financial sector cost 625 bln. (11 bln. ), the support of industry sector 798,3 bln. (14.5 bln. ), the support of regions 300 bln. (5.5 bln. ), the support of socially vulnerable groups 111,5 bln. (2 bln. ). In total, government spent 5.4% of GDP for the support of banking sector. This cost equals approximately the half of the total capital of the Russian banking system. Bank VTB received 村 of this sum. 796 bln. 319 bln. 1 114 bln.
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| 21 There were several reasons of Economic crisis in Russia started 2014 Economic slowdown since 2013 Reduce in world oil prices Devaluation of Russian ruble Economic sanctions imposed on Russia | 2121 N A T I O N A L R E S E A R C H U N I V E R S I T Y
The main reason for the crisis was the reduction in oil prices and Rubles devaluation followed by 22 N A T I O N A L R E S E A R C H U N I V E R S I T Y
Problems with economy again Timeline of the crisis 2013 Stagnation continues due to reduce in oil prices and economic sanctions2014 December January - August In the end of 2013, Russian President Vladimir Putin admitted that stagnation of Economy is observed. IMF and Word Bank also stated the decline in economic growth indicators From January to August 2014 Russian currency has weakened by 24,9%. In March the economy was first hit by economic sanctions imposed on Russia because of the annexation of Crimea In August Russia imposed trading embargo on European countries 23 N A T I O N A L R E S E A R C H U N I V E R S I
Black Monday Russian Ruble Dramatic fall 2014 On December 12th Rosneft issued an $11 billion rouble-denominated bond at a lower yield than government bonds were offering that day, which the central bank immediately said it would accept as loan collateral. On 15th December Russian Ruble has lost 10% of its value. This was followed by Black Tuesday, when Ruble has lost almost 13% of value. The panic on Russian markets has started. Downgrade in ratings On 16th January Moodys decided to change Russias credit rating from Baa2 to Baa3, on 21st February it was changed to Ba1. On 19th January Moodys has downgraded ratings of such companies as 束Sberbank損, VTB to 束Baa3損. On 26th January Standard & Poors has downgraded Russias credit rating to BB+ 2015 15 December 16 January Timetable of the crisis 24 N A T I O N A L R E S E A R C H U N I V E R S I
Partial recovery 2015 8 April Drop in Russias reserve fund is stated On 1st March Russias reverses have fallen to $360 billion, which is the lowest measure since 2007. That day Russian minister of economy, Aleksei Ulukaev stated that 2015 budget will be completed with more than 2 trillion Rubles ($40 billion) deficit 2015 1 March Russian Ruble has strengthen for more than 10%, although it is stated that it is overvalued. The CPI for March is 16.9% To be continued Timetable of the crisis 25 N A T I O N A L R E S E A R C H U N I V E R S I
Crisis did much harm for Russias economy, enterprises and citizens This lead to downgrade in ratings Rating Prev. grade Current grade Fitch Moodys S&P 4.80% 5.70% 2014 2015 Unemployment in Russia slightly increase, but further increase is expected 7% 9% 10% 74% 7% of workers are in danger of losing their jobs; 9% have experienced the decrease in salary; 10% dont get the salaries in time Banking sector was also affected by negative trends, bln. euros BBB- Ba1 BB+ BBB Baa1 BBB 26 N A T I O N A L R E S E A R C H U N I V E R S I T Y 4.7 6.74 9.24 7.43 3.73 10.42 15.42 18.38 18.05 10.7 42.7 12.9 39.4 -2.5 -10 0 10 20 30 40 50 60 0 5 10 15 20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Banks' Profits, billions of Rubles Credit portfolio growth, % Deposits growth, %
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| 28 This actions made by the government should help country to get out of the crisis 5.38 35.89 Social Liabilities, bilions of Euro Economic growth activation, billions of Euro 0.29 0.95 0.18 0.553.42 Amount of social liabilities Drug supply for citizens Unemployment programmes Programmes for disabled people Social payments for unemployed people Rise of pensions Economic growth activation 0.180.07 28.18 3.64 2.91 0.55 0.36 Small business support Raw material sector support Banking sector support Investing projets support Regions direct support Project financing Indusrtial sector support 3.5 2.28 1.24 1.19 1.14 0.98 0.88 0.54 0.38 0.26 0.24 VTB Gazprombank Rosselhozbank VTB 24 Alpha-Bank Otkrytie Moscow Bank Promsvyazbank MCB Saint-Petersburg Rossija 28 N A T I O N A L R E S E A R C H U N I V E R S I T Y
Summary: anti-crisis policy in Russia could be characterized as: Huge role of government in economic processes during the crisis High costs of anti-crisis programs Inadequate policy of the government and Central Bank Support of large government companies | 2929 N A T I O N A L R E S E A R C H U N I V E R S I T Y
N A T I O N A L R E S E A R C H U N I V E R S I T Y pentegovvit@gmail.com alexander.d.kulakov@gmail.com
Postscript 31 N A T I O N A L R E S E A R C H U N I V E R S I T Y Why should a financial engineer be paid four times to a hundred times more than a real engineer? A real engineer builds bridges; a financial engineer builds dreams. And you know, when those dreams turn out to be nightmares, other people pay for it Andrew Sheng Chief Adviser to the China Banking Regulatory Commission

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  • 1. N A T I O N A L R E S E A R C H U N I V E R S I T Y National group paper prepared by: Alexander Kulakov and Vitaly Pentegov
  • 2. Meet our group 2 Management Department Mathematical Department Sberbank CIB VTB bank Alexander Kulakov Vitaly Pentegov N A T I O N A L R E S E A R C H U N I V E R S I T Y
  • 3. Contents 3 N A T I O N A L R E S E A R C H U N I V E R S I T Y Banking sector in Russia The Great Recession Russian crisis in 2014-2015 Anti-crisis government program
  • 5. Structure of the Russian banking sector 5 N A T I O N A L R E S E A R C H U N I V E R S I T Y Central Bank Banks Credit organizations Subsidiaries of foreign banks Commercial banks Banks with state share Banks with foreign share Creditorganizations Sberbank VTB Gazprombank Open bank Alfa bank Rosselkhozbank Top 6 banks by assets
  • 6. Main indicators of Russian banking system 6 N A T I O N A L R E S E A R C H U N I V E R S I T Y 0 2 4 6 8 10 12 14 0.0 1000.0 2000.0 3000.0 4000.0 5000.0 6000.0 7000.0 8000.0 9000.0 10000.0 2010 2011 2012 2013 2014 2015 亠亟亳, 亟亠仗仂亰亳 亳 亟亞亳亠 亠亟于舒 仂 舒仆从舒 仂亳亳 亠仗仂亰亳 亳仆亳仆舒 亳 亟亞亳亠 亞仂. 亠亟于舒 个仂仆亟亳仂于舒仆亳亠 丶, % 仂 仗舒亳于仂于 Deposits from Ministry of Finance and another state funding Funding from the central bank, % of capital Credits, deposits and other funding from the central bank 1094 1071 1049 1047 1046 956 923 834 830 827 01.01.2013 01.01.2014 01.01.2015 01.02.2015 01.03.2015 Registered credit institutions Officially functioning Qualitative characteristics of Russian banking sector Share of the government support, bln. of rubles 0 50 100 150 01.01.2013 01.01.2014 01.01.2015 01.02.2015 01.03.2015 Ratio of high liquid assets to total assets Ratio of liquid assets to total assets Ratio of high liquid assets to demand liabilities (N2) Ratio of liquid assets to short-term liabilities (N3) Ratio of clients' funds to total loans Liquidity, %
  • 7. Main indicators of Russian banking system 7 N A T I O N A L R E S E A R C H U N I V E R S I T Y Some indicators of the banking sector financial soundness, % 13.7 13.5 12.8 12.6 12.2 8.5 9.1 9.2 9.4 9 50.7 51.4 52.1 52.7 52.1 1.01.13 1.01.14 1.07.14 1.10.14 1.11.14 Ratio of own funds (capital) to risk-weighted assets (Basel III N1.0 ratio) Tier I capital ratio N1.2 (Basel III) Risk-weighted assets (Basel III) to total assets ratio 2007 2008 2009 2010 2011 2012 2013 2014 Deposits from organizations Deposits of individuals Loans to individuals Credits for non-financial organizations Equity Assets Banking sector growth indicators per year
  • 9. About the crisis 9 N A T I O N A L R E S E A R C H U N I V E R S I T Y The Great Recession in Russia the Russian financial end economic crisis started approximately in July, 2008 and officially ended in April, 2010 caused by the global financial crisis and was compounded by political fears after the war with Georgia and by the plummeting price of Urals heavy crude oil, which lost more than 70% of its value since its record peak of $147 on 4 July 2008 before rebounding moderately in 2009. World Bank: Russian crisis in 2008 started as the crisis of private sector caused by high level of foreign funding in conditions of triple shock: from external trade, capital outflow and high restrictions on foreign borrowing.
  • 10. Causes of the crisis 10 N A T I O N A L R E S E A R C H U N I V E R S I T Y The impact of the global crisis was stronger to Russia than to another countries due to the following 3 reasons: American financial catastrophe; Oil price decline due to high dependence of Russia on its export; Errors and misunderstandings of Russian government Alexey Bayer, chief observer in Research Journal
  • 11. Stock market decline 11 2008 Vladimir Putin criticizes Mechels management Increase in anti-monopoly deals Newsweek Journal: After the war starts, Russian stock market faced one of the highest declines in stock quotes for the last 10 years. During one day quotes fell by 6%. Investors afraid of beginning of a new era of confrontation between Russia and West 2008 24 July 20 September 11 N A T I O N A L R E S E A R C H U N I V E R S I Illarionov A.N., economist, past president Putin advisor: This happened because of the aggressiveness of Russian authorities against the Russian and foreign business. One of the most brightest events were: the sending of the doctor to Mechels CEO and resignation of Robert Dudley from TNK-BP War in South Ossetia The beginning period: stock market decline
  • 12. 12 Decline in oil prices 2008 On the 16th of 2008 Urals Oil slumped to less than 70 dollars for barrel. This price was the basis indicator for Russian budget for 2009. Credit crisis of the Russian companies In the beginning of October the level of companies external debt was 527 billion dollars the level of foreign-exchange reserve that year 2008 4 July October 12 Employment problems 2008 In October 2008 the level of firing in companies started to increase despite of promises of officials and expectations of analysts 8 October Illarionov A.N. (9 October): There is a 15% decline in stock indices in the USA for the last months but in Russia for more than 30 Source: ROSSTAT, Russian Central Bank, Reuters In the last 5 month the Russian stock market lost more than 70% of the level in May. The market capitalization of Russian companies fell by more than 900 billion dollars Great recession in Russia
  • 13. 13 Decrease in ratings by world rating agencies 2008 After the decrease in ratings for several Russian banks from Fitch and Moodys, S&P also decreased its rating on 13th Russian companies and then the sovereign rating from stable to negative" Beginning of the crisis in real sector2008 10 October 18 November 13 GDP decrease 2008 0.4% of GDP decrease from the last month indicator 25 November Russian president Dmitry Medvedev told about the income of crisis to the real sector (industrial). According to the statements published by the Russian central bank on the 26th of November the total loss of the Russian banking sector came to 39.3 billion of rubles in October 2008. 1/3 of Russian banks (288 banks) lost 69 billion of rubles excluding Vneshekonombanks loss of 46 billion Great recession in Russia
  • 14. RTS index, S&P 500 and Oil price comparison 14 N A T I O N A L R E S E A R C H U N I V E R S I T Y A Vladimir Putin criticizes Mechel; B war in South Ossetia 2008; C Recognition of Abkhazia and South Ossetia by Russia; D Alexei Kudrin "no systematic crisis" speech; E measures to save major banks are adopted by the Russian government; F Global financial crisis of SeptemberOctober 2008; G President Dmitri Medvedev announced additional bailout financing $147(July 4, 2008) $45 (January 1, 2008)
  • 15. 15 15 N A T I O N A L R E S E A R C H U N I V E R S I Decrease in turnover 2009 Decrease in production2009 10 October 18 November End of recession 2009 24 August The turnover of commodities decreased by 2.4% firstly since 1999 According to Forbes, the number of Russian dollar billionaires decreased from 110 to 32 from May, 2008 to February, 2009. Their wealth decreased almost by 5 times. In the 1Q of 2009 the production of goods decreased by 14.3% in comparison with the 1Q of 2008 In the beginning of August 2009, Russian GDP increased by 7.5% on the basis of the 2Q of 2009. In the 2Q of 2009 the GDP was -10.9% Source: ROSSTAT, Russian Central Bank, Ministry of Economics 19th of February 2009 the peak of the crisis
  • 16. 16 End of the crisis 2010 20 April 16 N A T I O N A L R E S E A R C H U N I V E R S I End of the crisis Change in USD/Ruble and RTS index on the peak of the crisis relative to the same indicators of the year before and of the next year after the peak,%
  • 17. 17 17 N A T I O N A L R E S E A R C H U N I V E R S I Summary 6.50 9.50 6.00 5.00 2007 2008 2009 2010 -10.00 -8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 2007 2008 2009 2010 GDP Interest Rate Banking sector dynamics 2290.51 631.89 1444.60 1770.28 2007 2008 2009 2010 RTS index Credit portfolio, % Revenue Deposits from physical clients, %
  • 18. 18 N A T I O N A L R E S E A R C H U N I V E R S I Government anti-crisis solutions In 2008, the anti-crisis programs cost 1089 bln. (20 bln. ; 2.6% of GDP). The support of financial sector cost 785 bln. (14 bln. ), The support of industry sector 304 bln. (6 bln. ). Measures for financial sector support implemented during the crisis in 2008: Subordinated debt 450 bln. (8 bln. ); Recapitalization and another direct support 335 bln. (6 bln. ); Recapitalization of the Deposit Insurance Agency 200 bln. (4 bln. ); Banks recapitalization 75 bln. (1.4 bln. ); Recapitalization of the Mortgage Agency 60 bln. (1 bln. ). Measures for industrial sector support implemented during the crisis in 2008 : Tax and budget improvement measures for manufacturers 272 bln. (5 bln. ); Support of industries 52 bln. (1 bln. ); Tax and budget improvement measures for manufacturers for people 32 bln. (0.6 bln. ); Purchase of commodities for military men and socially vulnerable groups 32 bln. (0.6 bln. ).
  • 19. 19 N A T I O N A L R E S E A R C H U N I V E R S I Government anti-crisis solutions In 2009, the anti-crisis programs cost 1834,77 bln. (33 bln. ), The support of financial sector cost 625 bln. (11 bln. ), the support of industry sector 798,3 bln. (14.5 bln. ), the support of regions 300 bln. (5.5 bln. ), the support of socially vulnerable groups 111,5 bln. (2 bln. ). In total, government spent 5.4% of GDP for the support of banking sector. This cost equals approximately the half of the total capital of the Russian banking system. Bank VTB received 村 of this sum. 796 bln. 319 bln. 1 114 bln.
  • 21. | 21 There were several reasons of Economic crisis in Russia started 2014 Economic slowdown since 2013 Reduce in world oil prices Devaluation of Russian ruble Economic sanctions imposed on Russia | 2121 N A T I O N A L R E S E A R C H U N I V E R S I T Y
  • 22. The main reason for the crisis was the reduction in oil prices and Rubles devaluation followed by 22 N A T I O N A L R E S E A R C H U N I V E R S I T Y
  • 23. Problems with economy again Timeline of the crisis 2013 Stagnation continues due to reduce in oil prices and economic sanctions2014 December January - August In the end of 2013, Russian President Vladimir Putin admitted that stagnation of Economy is observed. IMF and Word Bank also stated the decline in economic growth indicators From January to August 2014 Russian currency has weakened by 24,9%. In March the economy was first hit by economic sanctions imposed on Russia because of the annexation of Crimea In August Russia imposed trading embargo on European countries 23 N A T I O N A L R E S E A R C H U N I V E R S I
  • 24. Black Monday Russian Ruble Dramatic fall 2014 On December 12th Rosneft issued an $11 billion rouble-denominated bond at a lower yield than government bonds were offering that day, which the central bank immediately said it would accept as loan collateral. On 15th December Russian Ruble has lost 10% of its value. This was followed by Black Tuesday, when Ruble has lost almost 13% of value. The panic on Russian markets has started. Downgrade in ratings On 16th January Moodys decided to change Russias credit rating from Baa2 to Baa3, on 21st February it was changed to Ba1. On 19th January Moodys has downgraded ratings of such companies as 束Sberbank損, VTB to 束Baa3損. On 26th January Standard & Poors has downgraded Russias credit rating to BB+ 2015 15 December 16 January Timetable of the crisis 24 N A T I O N A L R E S E A R C H U N I V E R S I
  • 25. Partial recovery 2015 8 April Drop in Russias reserve fund is stated On 1st March Russias reverses have fallen to $360 billion, which is the lowest measure since 2007. That day Russian minister of economy, Aleksei Ulukaev stated that 2015 budget will be completed with more than 2 trillion Rubles ($40 billion) deficit 2015 1 March Russian Ruble has strengthen for more than 10%, although it is stated that it is overvalued. The CPI for March is 16.9% To be continued Timetable of the crisis 25 N A T I O N A L R E S E A R C H U N I V E R S I
  • 26. Crisis did much harm for Russias economy, enterprises and citizens This lead to downgrade in ratings Rating Prev. grade Current grade Fitch Moodys S&P 4.80% 5.70% 2014 2015 Unemployment in Russia slightly increase, but further increase is expected 7% 9% 10% 74% 7% of workers are in danger of losing their jobs; 9% have experienced the decrease in salary; 10% dont get the salaries in time Banking sector was also affected by negative trends, bln. euros BBB- Ba1 BB+ BBB Baa1 BBB 26 N A T I O N A L R E S E A R C H U N I V E R S I T Y 4.7 6.74 9.24 7.43 3.73 10.42 15.42 18.38 18.05 10.7 42.7 12.9 39.4 -2.5 -10 0 10 20 30 40 50 60 0 5 10 15 20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Banks' Profits, billions of Rubles Credit portfolio growth, % Deposits growth, %
  • 28. | 28 This actions made by the government should help country to get out of the crisis 5.38 35.89 Social Liabilities, bilions of Euro Economic growth activation, billions of Euro 0.29 0.95 0.18 0.553.42 Amount of social liabilities Drug supply for citizens Unemployment programmes Programmes for disabled people Social payments for unemployed people Rise of pensions Economic growth activation 0.180.07 28.18 3.64 2.91 0.55 0.36 Small business support Raw material sector support Banking sector support Investing projets support Regions direct support Project financing Indusrtial sector support 3.5 2.28 1.24 1.19 1.14 0.98 0.88 0.54 0.38 0.26 0.24 VTB Gazprombank Rosselhozbank VTB 24 Alpha-Bank Otkrytie Moscow Bank Promsvyazbank MCB Saint-Petersburg Rossija 28 N A T I O N A L R E S E A R C H U N I V E R S I T Y
  • 29. Summary: anti-crisis policy in Russia could be characterized as: Huge role of government in economic processes during the crisis High costs of anti-crisis programs Inadequate policy of the government and Central Bank Support of large government companies | 2929 N A T I O N A L R E S E A R C H U N I V E R S I T Y
  • 30. N A T I O N A L R E S E A R C H U N I V E R S I T Y pentegovvit@gmail.com alexander.d.kulakov@gmail.com
  • 31. Postscript 31 N A T I O N A L R E S E A R C H U N I V E R S I T Y Why should a financial engineer be paid four times to a hundred times more than a real engineer? A real engineer builds bridges; a financial engineer builds dreams. And you know, when those dreams turn out to be nightmares, other people pay for it Andrew Sheng Chief Adviser to the China Banking Regulatory Commission